The US Federal Reserve has hit Swiss bank UBS (UBS) with a $268.5 million fine for “misconduct” by its rival, Credit Suisse, before the two merged in March.
Key things
- The Federal Reserve fined Swiss bank UBS $268 million.
- The Fed cracked down on “misconduct” by Credit Suisse, which was bought by UBS in March.
- UBS shares were unaffected by the news with a small gain on the day.
The Federal Reserve Board announced a consent order and fined UBS Group AG of Zurich, Switzerland, for misconduct by Credit Suisse. The latter was won by his Swiss rival after a period of unrest in March.
The misconduct charge was imposed on Credit Suisse for “dangerous and improper management of counterparty credit risk”. The Fed said the bank’s practices with former counterparty Archegos Capital Management LP violated its fair dealing rules.
With additional fines from the Swiss Financial Market Supervisory Authority and the Bank of England’s Prudential Regulation Authority (PRA) also revealed today, the total cost to UBS is expected to be around $387 million.
Credit Suisse was hit with a $5.5 billion loss after Archegos, an investment fund founded by former Tiger Management analyst Bill Hwang, collapsed with a $20 billion loss. Regulators said Credit Suisse had failed to manage the risk posed by Archegos, despite repeated warnings.
Credit Suisse’s CEO and chief risk officer have both stepped down after the company reported a $252 million quarterly decline attributed to third-party losses.
“The failure of Credit Suisse to manage risk effectively was extremely serious and created a major threat to the safety and soundness of the firms,” said Sam Woods, chief executive of PRA Bank of England. “The seriousness and prevalence of these failings has led to today’s fine being the highest ever imposed by the PRA.”
Despite the record fines, UBS shares were up 0.75% on the day.